HKEx hopes to boost commodities trading with London-HK Connect

Hong Kong Exchanges and Clearing Ltd. (HKEx, 00388.HK) plans to link commodity trading in the city with London through its wholly owned London Metal Exchange (LME), the Hong Kong Economic Journal reported Friday.

Market participants expect “London-Hong Kong Connect” to strengthen the status of the two cities as international financial centers and help institutional investors and mainland Chinese enterprises hedge commodity risks.

The plan was announced during President Xi Jinping’s first state visit to Britain.

The link will allow investors to buy commodity contracts sold by LME through HKEx’s futures exchange and make settlement in Hong Kong.

LME hopes it will pave the way for it to proceed with a plan to build a commodities warehouse in mainland China.

The plan was stalled earlier this year.

London-Hong Kong Connect exists only on paper at the moment.

A memorandum of understanding has been signed, but the setting up of a clearing mechanism awaits the approval of regulatory authorities of both cities.

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